Episode summary
Why Oil Prices Are Surging Despite Recovering Supply
Exchanges (Goldman Sachs)
· · 15 min · Guests: Daan Struyven
Summary
Brent crude has climbed to around $112 per barrel even though Middle East crude flows have recovered, because buyers are bidding up barrels on both the physical and financial side. Daan Struyven says refiners are worried about further shipping attacks and infrastructure damage, while investors are hedging portfolios because bonds and equities have become unusually sensitive to oil prices. He argues the move is mostly a higher risk premium, not a higher fair value, with Brent fair value around $85 and the market’s risk premium near $27 per barrel.
The tighter story is in refined products, not crude. Persian Gulf exports of refined oil products are only about 40% of 2025 average levels, and Struyven says diesel prices can stay well above historical averages even if Middle East crude prices ease. He also expects gasoline prices to face more upside because refiners are shifting output toward higher-margin diesel and jet fuel. Freight costs are adding pressure too, especially for Asia, where long shipping routes and disrupted tanker logistics are pushing up both crude and product prices.
Outside oil, Struyven sees net upside risk to European natural gas this winter, with TTF potentially rising from roughly 90 to 150 per megawatt hour if LNG stays weak and the winter is colder than average. He is also bullish on copper and gold: copper could rise another 10% by end-2027 as the US and China compete for inventories, while gold benefits from heavy central bank buying and a likely easier rate backdrop.
Key takeaways
- Struyven says Brent’s recent jump to around $112 is mainly a higher risk premium, not a change in fair value, which he puts near $85 per barrel.
- He sees upside risks to Brent from shipping attacks and infrastructure damage, but also says a diplomatic solution could quickly reduce the roughly $27 per barrel risk premium.
- Refined products are tighter than crude: Persian Gulf exports of refined oil products are only about 40% of 2025 average levels, keeping diesel prices elevated.
- Gasoline may keep rising because refiners are redirecting output toward higher-margin diesel and jet fuel, tightening gasoline supply.
- Struyven expects European natural gas prices to have net upside this winter, with TTF potentially reaching 150 per megawatt hour if LNG stays depressed and weather turns colder.
- He expects copper to rise another 10% by the end of 2027 and says gold has support from central bank buying and a better rates environment.
Notable quotes
“Brent crude oil prices have risen sharply to now around $112, per barrel because growing tensions in the Middle East and growing downside risks to supply are leading buyers to bid up barrels”
“the risk premium is $27 per barrel, so it's a lot of what we have seen in terms of the rise in prices”
“we do estimate that while crude oil exports out of the Persian Gulf are at 110% of 2025 average levels over the last couple of weeks, for refined oil products such as diesel, it's only 40% of 2025 average levels”
“the gasoline market is tightening very quickly, and there's more room for price upside on the gasoline side”
“we would see TTF prices in triple digit territory with a potential 70% increase to a 150 per megawatt hour”
How the episode opens
Oil flows from the Middle East have rebounded sharply, but prices remain high and rising. So what's keeping the market on edge? I'm Allison Nathan, and this is Goldman Sachs Exchanges.
Joining me is Daan Struyven, co-head of Global Commodities Research and head of Oil Research at Goldman Sachs. Daan, thanks for joining us again. You've been on this show a lot, but look, oil has been very topical, so thanks for joining us again.
Thanks. As I mentioned at the start, crude oil flows from the Middle East have substantially rebounded. If I'm not mistaken, they are at or at least close to 2025 averages at this point.
But I'm looking at my screen, oil prices have surged in recent days, again, deep into triple digits. So, what's driving that price move? So, Brent crude oil prices have risen sharply to now around $112, per barrel because growing tensions in the Middle East and growing downside risks to supply are leading buyers to bid up barrels, both in the physical market and also on the financial side.
Physical buyers such as refiners are seeing growing downside risks to supply because of an intensification of shipping attacks in the Middle East and because of some strikes on infrastructure by the Houthis. And because inventories are low, refiners, physical buyers are trying to get their hands on barrels while they're available because they see a high probability of a sharp drop in supply. And on the financial side, because bonds and equity prices are unusually sensitive to oil prices, there's also a significant bid from investors to hedge their portfolios against energy price upside.
Interesting. So, in some ways, what we're seeing here is precautionary buying by the consumers of crude oil, which makes me think that on the other side of it, that could have price implications.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- oil prices
- middle east crude flows
- refined products supply tightness
- copper price forecast
- gold demand
Watch the episode
Watch “Why Oil Prices Are Surging Despite Recovering Supply” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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